ForumsTaxes and Payroll

Thanks so much for your respnse, Luckiest! I will look into that. I'm trying to decide if I need a lawyer or a CPA for this particular situation. We do, however, need to get all three you have suggested.

What is SCORE?

Thanks again

The answer is easy, but I'd suggest you get yourself an education on the structure, rules and regs, etc, of C-Corp, S-Corp, and LLC right away. You are going to need it for more than this question alone, and you could drown in a morass of confusion if you don't.

As owners of a C-Corp, you and your husband pay yourselves a salary, which is basically a W-2 wage. The corp is employing you to do the work it needs done; therefore you are employees. No "permission" is required from the IRS; however, you will have to become incorporated first and file the papers with the state, I hope you do realize. You will become officers of the corp, and the corp pays your salary. So in a sense, you are both owner, officer, and employees at the same time - get it?

The corp must pay all portions of the payroll taxes on you. This generally means that you will be deciding on how much you can be/should be paid as a net take-home figure, and then figuring your taxes from net to gross. QuickBooks can calculate this for you.

From your question, it seems there is so much you are not yet educated on regarding business, that it would behoove you to not only get yourself a good CPA, but take some serious time to learn the ropes for yourself. As I have found out for myself, a CPA does not have the time to teach you all you have to know - there is no substitute for your own study.

You also have a world of study before you regarding the multitude of pension plan opportunities out there for you, and if you may want to get a medical plan.

If you have no employees besides your spouse and yourself, there are different opportunities available to you than if you have employees.

Good luck to you!

Married with partners,
It seems like you are getting a great deal of advice on the subject.

It appears from the posts that you have filed a 1065 and a schedule C. Not sure which one came first. An LLC automatically defaults with two or more people as a partnership which should file the Form 1065. You can make an election if you are husband and wife to file schedule Cs. Each of you would have to file a schedule C. I believe it was last year that the IRS started allowing for this election.

Having said that. You may not want to make that election. Filing to schedule C automatically will make the two of you pay self employment taxes on the total income from the business.

If you remain an LLC filing the Form 1065 there is some planning techniques that can be implemented that might save you some tax dollars.

For example. Is you LLC member manged or manger manged? Are there any loans or guarantess against you or your wife on behalf of this LLC?

Typically if you work in the LLC , are the manager or guarantee debt, the IRS presumes that you should be subjuct to self employment.

Both you and your wife would need to amke estimated payments on a quarterly basis to avoid any underpayment penalties. A good CPA should be able to take your numbers and advise you on the amount of payment to keep you out of trouble.

In regards to your second paragraph. If you want your LLC to be an S-Corp or C-Corp, then you can make the election to do so. You can change on Form 8223. But be careful what you wish for and make sure you make the move for the right reasons.

In regards to your third paragraph. You can take draws from the partnership and pay in quarterly to the IRS. If you and you wife are both partners which sounds like the case, then you should not get a W-2 in general.

The partnership split questions is really up to you. There are some benfits to have a women owned business. Say 51/49 split.

Let me know if you have more specific questions and we can go from there.